Project Management at Cisco Ben Rus TIM 101 Seminar – .docx

Project
Management at
Cisco
Ben Rus
TIM 101 Seminar – Fall 2014
10/30/14
An Agile Transformation Journey
Cisco Confidential 2 © 2013-2014 Cisco and/or its affiliates.
All rights reserved.
[email protected]
• Scrum Master – Cisco, 2009 – present
Portfolio
Group
• B.S. Information Systems Management, UCSC, 2009
cus on Software Development and Network
Administration
Ben Rus

• About Cisco
• Cisco Services Technology Group
• Project Management
• Agile @ Cisco
• Project Management As A Career
• Q & A
Cisco
Past, Present and Future
Two Cables
and a Desire
to Connect

Intelligent
Connections
at the Heart
of Cisco
Intelligent Connections
Internet of
Everything
Digitize the World
Connecting:
• People
• Process
• Data
• Things
Connectivity
Digitize Access to Information
• Email
• Web Browser
• Search
Immersive
Experiences
Digitize Interactions
(Business & Social)
• Social
• Mobility
• Cloud

• Video
Networked
Economy
Digitize Business Process
• E-commerce
• Digital Supply Chain
• Collaboration
The Internet of Everything
FY13 Financials
Cash on Hand:
$47B+
Revenue:
$48.6B,
6% Y-Y Growth
Product
Revenue:

$38B
Services
Revenue:
$10.6B
Cisco’s R&D Commitment
We Build the
Solution
s You Need to Succeed
*Percent of FY13 Revenue
Source: IBM: Booz Allen Report, Intel: Booz Allen Report,
HP: 10-K
$5.9B in R&D spend
12% of FY13 revenue
17,000+ patents
170 labs around the world
28,000 engineers

IBM: 6 %* Intel: 19%* HP: 3%*
Build – Buy – Partner – Integrate
culture employees
…are our competitive advantage
74K+
employees
165+
countries
380+
offices
17%
other
39%

engineering 20%
services
24%
sales
Core
Mobility
Core
Security Collaboration
Datacenter and
Virtualization Video
Acquisitions: An Extension of
Cisco’s Innovation Engine
Nearly 170 Across Architectures

Market Leadership Matters
No. 1
Voice
35%
No. 1
TelePresence
44%
No. 1
Web
Conferencing
41%
No. 1

Wireless LAN
50%
No. 2
x86 Blade
Servers
26%
No. 1
Routing
Edge/Core/
Access
51%
No. 1
Security
32%
No. 1
Switching

Modular/Fixed
66%
No. 2
Storage Area
Networks
41%
Q1CY14
Leading for Nearly 30 Years
WellFleet
SynOptics
3Com

ACC
DEC
Proteon
IBM
Bay Networks
Newbridge
Cabletron
Ascend
Fore
Xylan
3Com Nortel
Ericsson
Alcatel

Juniper
Lucent
Siemens
NEC
Foundry
Redback
Riverstone
Extreme Arista
HP
Avaya
Juniper
Huawei
Aruba

Brocade
Checkpoint
Fortinet
ShoreTel
Polycom
Microsoft
F5
Riverbed
Dell
Internet of
Everything
1990 – 1995 1996 – 2000 2001 – 2007 2008 – Today 2015

Pune
s: Engineering, Support, Operations,
Leadership
Cisco Services Technology Group (CSTG)

What is a Project?
• A project is defined as a temporary endeavor with a beginning
and an end
that is undertaken to create a unique product, service, or result.
• There are typically 3 main constraints for any given project
deliver a product,
service, or result with the specified features and functions.
project

project.
• Quality is often considered the 4th constraint
• Note: These constraints are typically referred to as the Project
Management Triangle where each side
represents a constraint. One constraint cannot be changed
without affecting the others.
What is Project Management?
• Project management is a set of
principles, practices, and techniques
applied to drive projects from start to
finish while coordinating the project's
resources and controlling the risks
and constraints.

• Two main methodologies:
• Waterfall (Linear)
• Agile (Iterative)
• Project Management Body of
Knowledge (PMBOK) 4th Edition,
Project Management Institute
Waterfall Process:
Linear & Sequential
Source: Cisco Product Development Methodology (CPDM)
Concept
Commit Execute
Commit
General

Availability
Conceptualization
Planning
Development
Validation
Execution
End of Life
(EOL)
Deployment
Maintenance
Typical Waterfall Roles (PM)
Product Manager Project Manager Program Manager
• Micro-Level Manager

• Responsible for managing
and monitoring the day to
day activities of project
team from start to finish
• Accountable for success
or failure of a project
• Macro-Level Manager
• Responsible for managing
a collection of projects
that form a program
• Set overall direction for
teams and future projects
they will work on
• Work with end users/
customers to define detailed
requirements
• Responsible for ensuring that
the product meets the

specifications
en
time
phases can take years
schedule
The Waterfall Process

F35 Project Delayed By Software Problems
$273 million in 2014 to a wallet-busting
$337 million by 2015.
Example Waterfall Project
Source: Jeff Sutherland: Disruptive Leadership with Scrum,
10/6/14 talk at Cisco
nly 35% of projects are successful – On time, on budget,
with

requested features
The Industry Today
Source: The Standish Group: Chaos Report, 2007
Time To Try Something Different!
Waterfall Process:
Linear & Sequential
Source: Cisco Product Development Methodology (CPDM)
Concept
Commit Execute

Commit
General
Availability
Conceptualization
Planning
Development
Validation
Execution
End of Life
(EOL)
Deployment
Maintenance
Agile (Iterative) Development Process
Itera&on
3
Itera&on

4
Itera&on
5
Itera&on
n
Itera&on
1
Itera&on
2
Agile (Iterative) Development Process
Target
System
Itera&on
3

Itera&on
4
Itera&on
5
Itera&on
n
release 1 release n
Incremental delivery in time-boxed iterations
Itera&on
1
Itera&on
2
Iteration Mechanics (Scrum)

Product
Backlog
Itera&on
Backlog
Itera&on
2
Weeks
Daily
Mee&ng
Product
Increment

Individuals and Interactions over Processes and Tools
Working Product over Comprehensive Documentation
Customer Collaboration over Contract Negotiation
Responding to Change over Following a Plan
That is, while there is value in the items on

the right, we value the items on the left more.
www.agilemanifesto.org
Agile Manifesto Values
-9 people
ctional
increment in 2 weeks
The Scrum Team

Scrum Brings Two Key New Roles…
Scrum Master:
tator for the team
Product Owner:
the backlog
roadmap

s (or is) the customer/
client
–> coach and
empower
results
ways
a product
…And Changes Many Others

time
phases can take years
schedule
ive
The Waterfall Process
variable scope

The Agile Process
-to-market

titive advantage
Why Agile?
World’s Best Stealth Fighter is not Made in America
• Saab JAS 39E Gripen
• All systems radically improved,
cheaper than previous version
• Cost $43M (80% less than F35)
• Just won in Brazil, may beat
F35 in Denmark

• Agile development using Scrum
Bill Sweetman, Aviation Week
Source: Jeff Sutherland: Disruptive Leadership with Scrum,
10/6/14 talk at Cisco
The tide is turning
Dr. Dobb’s Journal, Scott Ambler Agile Adoption Survey, 2007
Dr. Dobb’s Journal, Scott Ambler Agile Adoption Survey, 2007
69%
• 69% of companies have at least one agile project

Scrum Is Mainstream
Typical Agile Transformation Journey
Being Agile High Performing Teams
Year 1 Year 2 Year 3
Doing Agile
CSTG

This is the hardest part:
• Organizational structures and constraints come into play
• Cultural and mindset changes are challenging
• High impact on business and operations
Sample CSTG Project: 2.5 Years into the Journey
117
207
325
184
344 $1.9 $1.7
$1.5
$1.0

$0.6
0
50
100
150
200
250
300
350
400
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0

M
ay
-1
2
Ju
l-1
2
S
ep
-1
2
N
ov
-1
2
Ja
n-

13
M
ar
-1
3
M
ay
-1
3
Ju
l-1
3
S
ep
-1

3
N
ov
-1
3
Ja
n-
14
M
ar
-1
4
M
ay
-1
4

Ju
l-1
4
S
ep
-1
4
N
ov
-1
4
Fe
at
ur
es

M
ill
io
ns
Operating
Cost
Feature
Delivery
CSTG Results So Far

Project Management Industries & Fields
• Product Development
• Construction
• Engineering
• Quality Assurance
• Industrial Design
• High-Tech
• Manufacturing
• Visual Design
• Pharmaceutical

• Process Automation
session
Retrospective
…Prepare for and carry out this
full day activity
Day in the life of a Scrum Master
-Planning Days:

maintain and groom the backlog
the team
s
…Be present with the team
Traits of a Scrum Master

stakeholders
Certifications (Waterfall)
CAPM PMI-RMP PMI-SP
Name Certified Associate in Project Management
PMI – Risk
Management
Professional
PMI – Scheduling
Professional
Project Management
Professional

Offered By
Education Associated Degree Bachelors Bachelors Bachelors
Work Experience 1500 Hrs 3000 Hrs 3500 Hrs 4500 Hrs + 3 Yrs
Source: Project Management Institute (PMI)
Certifications (Agile)
Name Certified Scrum Master Certified Scrum Product Owner
Certified Scrum
Professional Certified Scrum Coach
Offered By
Work Experience Minimal Minimal 2000 Hrs “Scrum Expert”

Certification
Process
2-day Class, Pass
Exam
2-day Class, Pass
Exam Pass Exam
3 year interactive
application
Source: scrumalliance.org
Cisco Confidential © 2013-2014 Cisco and/or its affiliates. All
rights reserved.
Champion Forum_2014-07-21_v03.pptx
46
Overlap between grades allows transition

between paths for individuals with
appropriate profiles
Sr. Mgr Sr. Dir GM SVP VP Dir
Eng I PE DE Eng II Fellow Eng III Sr. Eng TL
ScrumMaster Ia/Ib
ScrumMaster II
Senior
ScrumMaster
Coach
Dir. Coach
Mgr
Careers can begin on
ScrumMaster or
development path
Careers can begin on

ScrumMaster or
development path
Individuals either devote their careers to an agile
leadership role as ScrumMaster or shift focus to
agile management or agile development
Cisco Scrum Master Career Path
Tips to get into the field
• Internships – Great way to get exposure and business
experience
• Education:

• Stay up on industry trends
• Participate in local chapters of organizations e.g. PMI, SV
ALN, Meetups
Thank you.
{name}
{due date}
Exploratory 3
Xunzi’s Unique Ideas about Leadership
Where ranks in society are equal, there will not be proper

distinctions; where power is equally distributed, there will be
no unity; when the masses are on the same level, it will be
impossible to employ them. That there is Heaven and there is
Earth shows that there are differences of higher and lower, but
it is only after an enlightened king is established that the state
is managed on the basis of regulations. (deBary 98)
I noticed this interesting quote regarding what makes for good
“human resources.” Xunzi believed that anyone could rise to the
rank of prime minister, men of service, or high court officials
regardless of wealth or background. This is advanced for
several societies at that time in history, considering societies
such as India had a caste system, which would not permit
anyone to rise through the ranks. However, Chinese society
seemed to be much more flexible. Chinese boys were raised on
Confucian concepts in order to be accepted into high ranks in
society such as the ones Xunzi mentions, which shows his
support for Confucian ideals regarding place in society. On a
global level, this concept was also introduced in Japan when
Confucian ideals were brought to Japan – the boys in the
Japanese feudal era were educated in Confucian schools in order
for the states to choose the best of the best to be leaders. It’s
interesting to see how different cultures had different beliefs
regarding class or caste in society.

Also interesting (though not surprising given class discussions),
is the fact that while it was possible to rise through the societal
ranks, it was impossible to rise to the rank of a Chinese king
without being a member of the royal family’s bloodline. Anyone
could become a sage or a prime minister, but not everyone was
“fit” to be a king even if they had the perfect ideals and had
achieved enlightenment as Confucius defines it. What’s so
fascinating about that is how the Chinese believed the Mandate
of Heaven is like a privilege (and that it was stripped from one
royal family when they overindulged in drink and became
alcoholics), but that even if there was a family with the perfect
set of ideals and whose members embodied the Chinese view of
enlightenment, they could not become the next royal family.
Xunzi’s ideas about merit and leadership only go so far. I think
one reason this concept of divine right is so strange and appears
to be too rigid to us is because of modern American culture and
the understood right to choose our leaders, a right which
historically was withheld from the Chinese people as a result of
their believing in divine right to rule. Maybe it was hard for
Xunzi to even imagine a king from outside those blood lines.
On a related topic, Xunzi also refers to the kings being stripped
of their right to rule and being demoted to the lifestyle of a

commoner if they shall act like unenlightened commoners and
men unworthy of ruling. This concept strongly suggests that
Xunzi believed that the right to rule was not based on one’s
bloodline alone, but also was based on the ability to rule in
accordance with The Way. Xunzi specifically mentions adhering
to rites and moral principles (pg 98), which are Confucian
ideals. Confucius, similarly to Xunzi, believed that superiors
had responsibilities to uphold as opposed to just being assertive
and bossing around their inferiors. He believed that they had to
show respect to their underlings in order to receive respect in
return. The leaders also had to express faithfulness to rites and
ritual, so as to lead the people properly. A lack of propriety
would, in turn, receive a lack of respect or, as Xunzi wished, for
the leaders to lose the power they possessed. It seems that this
belief that the right can be removed, though it might contradicts
an absolute divine right to rule is key to orderliness and
governmental stability. I imagine how much of a problem
corruption might have been without it.
Exploratory #1
Conflicts and Common
The reading talked about the Three-in-one teaching, which I felt
very interesting “He promoted Confucian teachings that
centered on the pursuit of sage hood, expressing them in a
distinctly religious idiom and selectively combining them with

elements derived from other traditions, namely Daoist internal
alchemy and Buddhist teachings about mental cultivation,
especially those of the Chan school, ‘Introducing Chinese
Religion (168).’” When I was reading this quote, an interesting
question rising in my mind: what if the founder of these three
religions (Confucius, Laozi and Budda) know the Three-in-one
Teaching, will them agree with Lin Zhaoen? The common ideas
of three religions are similar, basically they all pursue the
relationship between human, heaven and earth. The goals of
three religions are the pursuit of the way to be a kind person, to
be a wise man, to be an honest person. We need to understand
what is right and what is wrong. However, the conflicts among
three religion are unignorable when we study for Three-in-one
teaching. A primary method of worship of Buddhism is leaving
family, how could this idea fuse with Confucianism values,
which are value interpersonal relationship and pursue the
establishment of social rules.
Other thing I felt very interesting is various local gods and
ancestors in Chinese tradition. A primary method of worship
was via the offering and sacrifices “while human beings
venerate and pray to the gods with the hope of receiving their
help and harnessing some of their numinous power, the gods
also rely on the offering and sacrifices of the faithful. The gods’
very status and authority as divine being is dependent on the
worship and respect they elicit from their devotees. That status

must be continuously safeguarded and substantiated, primarily
by the gods’ ability to efficaciously respond to the supplications
of the faithful, ‘Introducing Chinese Religion (172)’” which is
very similar as three religions. The conflicts now arise again:
can people to several gods for help at time? If people really
overcome the challenges that they pray for help, which god you
should thanks for?
Pecoski mentioned that most people in China are atheist, I
believe that may because the influence of three-in-one idea,
seek common points while reserving difference. We can see the
three religions have always been one, but they can never really
be one. I believe special of unique of each religion and thought
are crucial for them continuous exist and develop today.
!
!
!
!
!

!
!
!
!
The
Office
Product
Cycle
About
every
3

years
a
major
release
of
Office
comes
out
with
features
aimed
at
increasing
produc?vity
and
ease
of
use
for
our
customers.

What
is
Office?
How
many
people
does
it
take
to
ship
core
Office?
800

SoHware
Design
Engineers
(Developers)
800
SoHware
Design
Engineers
in
Test
(Testers)
400
Program
Managers
(Feature
designers)
200
Localizers,
Lab

Managers,
etc.
200
Planners,
Recruiters,
Sales
and
Marke?ng
2400
Total
Customer
feedback
Office
vision

pillars
Code
features
Beta
feedback
Release
soHware
It
begins
with

3
dis?nct
roles
• Program
Manager:
Design
new
features
based
on
customer
feedback,
Office
strategy,
and
priori?es
• SoHware
Design
Engineer:
Code
the

features
to
specifica?ons,
crea?vely
solving
design
issues
and
fixing
bugs
• SoHware
Design
Engineer
in
Test:
Validate
the
code,
improve

the
user
experience,
and
deliver
a
quality
product
to
customers
And
a
spec…
Walking
the
fine

line
of
a
feature
specifica?on
Begins
its
life
as
an
idea
Turns
into
a
1
page
spec

Approved
by
management
to
be
flushed
out
Dev/Test/PM
resources
assigned,
increases
to
10-‐15
pages

Management
approved
for
coding
Spec
grows
to
30-‐50
pages
Feature
crew
takes
over
and
completes

it
on
?me
Feature
crew
review
and
check-‐in
A
feature
crew’s
goal
..
“To
check

in”
• Feature
team
makes
the
decisions
– Must
fit
into
allowed
development
?me
– Must
be
fully
resourced
– Responsible
for
geeng

it
done
• Management
will
approve
features
via
– Adds/Cuts
– Feature
progress
– Bug
count
– 8
ques?ons
1
Dev

1
Test
1
pm
Feature
Crew
What
is
in
a
feature
specifica?on?
• Jus?fica?on
• User
Scenario

• Goals
and
non
goals
• Design
specifics
• Details,
details,
details
• Pictures
• Algorithms
• API
defini?ons
• Workflows
• Security
• Privacy

• World
readiness
• Performance
• Responsiveness
• Accessibility
• Supportability
• compa?bility
Typical
28
to
32
month
schedule

Plan
Code
Test
Beta
RTM
Planning
Phase
4-‐6
months
Create
lists
and
1
page

specs
Development
and
test
es<mate
and
risk
assessment
Adds/cuts
4
Months
Features
ready
to
go
Fix
last

remaining
important
bugs
4
Months
Beta
1
about
10,000
users
Beta
2
about
1,000,000
users
12
months
Planned

tes<ng
phase,
valida<on,
user
scenarios,
interna<onal,
stress,
security,
configura<on,
accessibility,
compa<bility
etc.
8
months:
Feature
crew
work
broken
up

into
3
milestones
Metrics
and
Quality
• Bug
severity,
incoming
rate,
regression
rate
• Automa?on,
Code
coverage,
security
reviews,
“up?me”

and
Dr.
Watson!
• Beta
feedback,
internal
deployment,
IT
signoff
• Key
partner
signoff
“TAP”
program
• Test
signoff
and
checklists

0
100,000
200,000
300,000
400,000
500,000
1
3
5
7
9
11

13
15
17
19
21
23
25
27
29
31
33
35
37
39
41
43
45
47
49
H
it
s

Bucket
number
Example
Watson
Curve
Watson
We
don’t
have
user
steps
or
data
We
know
what
line

of
code
caused
the
crash
and
can
oHen
guard
against
it
The
future
of
Office
in
the
cloud

• Take
your
exis?ng
workflow
and
extend
it
to
the
cloud
(backups,
collabora?on,
roaming)
• Feature
updates
made
easy
and
administered
from

one
place
• A
more
connected
and
social
experience
Core values for Microsoft
Microsoft
Drive for
results
Honesty
and
integrity

Big
challenges
Passion
Career and Interview Tips
ompanies can quickly determine if you are wasting
their time, don’t waste yours!
eager to learn. We can always teach you what you need
your life will be there
critical

arrogant, we need YOU to survive
Stories
Thank you

Goal Alignment for Success
Debbie Janes
Microsoft Services
1/14/2010
Agenda
Three Main Topics
! Microsoft Overview and My Role
! The Lesson: Goal Alignment in an Organization
! Selling as a career
Fast Facts

Very Brief History of Management Theories
Written by Carter McNamara, MBA, PhD, Authenticity
Consulting, LLC. Copyright
1997-2008.
Views on management have changed substantially over the past
century -- particularly in the past few decades. Also see
! Scientific Management Theory
• (1890-1940)
At the turn of the century, the most notable organizations were
large and industrialized. Often they included ongoing, routine

tasks that
manufactured a variety of products. The United States highly
prized scientific and technical matters, including careful
measurement and
specification of activities and results. Management tended to be
the same. Frederick Taylor developed the :scientific
management
theory” which espoused this careful specification and
measurement of all organizational tasks. Tasks were
standardized as much as
possible. Workers were rewarded and punished. This approach
appeared to work well for organizations with assembly lines and
other
mechanistic, routinized activities.
! Bureaucratic Management Theory
• (1930-1950)
Max Weber embellished the scientific management theory with
his bureaucratic theory. Weber focused on dividing
organizations into
hierarchies, establishing strong lines of authority and control.
He suggested organizations develop comprehensive and detailed
standard operating procedures for all routinized tasks.

! Human Relations Movement
• (1930-today)
Eventually, unions and government regulations reacted to the
rather dehumanizing effects of these theories. More attention
was given
to individuals and their unique capabilities in the organization.
A major belief included that the organization would prosper if
its workers
prospered as well. Human Resource departments were added to
organizations. The behavioral sciences played a strong role in
helping
to understand the needs of workers and how the needs of the
organization and its workers could be better aligned. Various
new
theories were spawned, many based on the behavioral sciences
(some had name like theory “X”, “Y” and “Z”).
Maslow's Holistic Dynamic Needs Hierarchy
P = Physiological
S = Safety
L = Belongingness and Love
E = Esteem

SA = Self-Actualization
Focus Topic: Goals and Commitment Setting
Management by objectives
From Wikipedia, the free encyclopedia
1. Management by Objectives (MBO) is a process of agreeing
upon objectives within an
organization so that management and employees agree to the
objectives and understand what
they are in the organization.
2. The term "management by objectives" was first popularized
by Peter Drucker in his 1954 book
'The Practice of Management'.[1]
Management by Objectives

Domains and levels
! Objectives can be set in all domains of activities
(production, services, sales, R&D, human
resources, finance, information systems etc.).
! Some objectives are collective, for a whole department or the
whole company, others can be
individualized.
Practice
! MBO is often achieved using set targets. MBO introduced
the SMART criteria: Objectives for
MBO must be SMART (Specific, Measurable, Achievable,
Relevant, and Time-Specific).[2] In some
sectors (Healthcare, Finance etc.) many add ER to make

SMARTER, where the E=Extendable
R=Recorded.[3]
! Objectives need quantifying and monitoring. Reliable
management information systems are
needed to establish relevant objectives and monitor their "reach
ratio" in an objective way. Pay
incentives (bonuses) are often linked to results in reaching the
objectives
Limitations
! When this approach is not properly set, agreed and managed
by organizations, in self-centered thinking employees, it may
trigger an unethical behavior of distorting the system of results
and financial figures to
falsely achieve targets that were set in a short-term, narrow,
bottom-line fasion.[4][dubious – discuss]

! The key difference is that rather than 'set' objectives from a
cascade process, objectives are discussed and
agreed, based upon a more strategic picture being available to
employees. Engagement of employees in the
objective setting process is seen as a strategic advantage by
many [6]
! A saying around MBO and CSF's -- "What gets measured gets
done" [7]-- is perhaps the most famous
aphorism of performance measurement; therefore, to avoid
potential problems SMART and SMARTER
objectives need to be agreed upon in the true sense rather than
set.
Microsoft Commitment Setting
The Process
! Guides our behavior.
! Used employee performance reviews.
! For each organization, the sum of individual commitments

achieved can also ensure the success
of meeting the organization's business objectives.
Discuss:
What
are
the
benefits
of
se3ng
commitments?
! Commitment setting consists of three components:
! Commitment
! Ex: : Improve SAT for Devs, IT Pros, Students, Startups
! These are aligned to the companies priorities
! Execution plan

! Ex: Continue on our journey of World Class Sales, Drive
traffic to a helpful web
resources that increases developer sat
! These may be field imperatives for the field to do from
corporate planning
! Accountabilities
! Ex: Increase overall employee satisfaction by greater than 5
percent.
It
is
said
that
a
goal
is
created
three
:mes:
as
a
mental

picture,
when
it’s
wri?en
down
to
add
clarity
and
dimension
and
when
you
take
ac:on.
! The goals are

! to simplify and standardize the process that organizations use
to develop and share
commitments;
! to increase transparency, ensuring that teams are focused on
the right work, and thereby
directly affecting business results;
! and to empower employees to drive focus and accountability
for their work.
! Q: What are SMART commitments?
! A: Use concise action-based statements for your
commitments based on the following SMART
criteria:
• Specific
• Measurable
• Achievable

• Results-based
• Time-specific
Let’s
prac:ce:
Set
a
1-‐2
SMART
commitments
for
yourself
to
improve
your
grade
this
Semester;
share
it
with

the
class
! Well-written commitments have the following qualities:
- Are focused action statements that allow you to make smarter
daily decisions about where you should be
investing your time
- Prioritize work that must be done in a given timeframe
- Provide a framework for your—and your organization's—
efforts and accountabilities
- Ensure that your work is aligned with the greater efforts of
your manager, your team, and the company,
enabling you to understand how your work contributes to the
overall success of Microsoft
- Help you drive your career, expand your skills, and ultimately
increase job satisfaction

- We all have customer satisfaction commitments
Let’s
prac:ce:
What
are
possible
ways
that
these
roles
could
help
with
customer
and
partner
sa:sfac:on?
-‐

Product
planner
-‐
Enterprise
seller
-‐
Telesales
person
-‐
Pre-‐Sales
technical
specialist
The Alignment of Commitments
Organizational Alignment
! For each organization, the sum of individual commitments
achieved can also ensure the success

of meeting the organization's business objectives.
Let’s
prac:ce:
Pick
an
Organiza:onal
Goal
and
Let’s
set
a
commitment
for
• The
Chancellor
of

UCSC
• The
head
of
each
department
• The
head
of
each
college
• Student
leadership
• Admissions
Officer
• Students

Sales Competencies
• Building Customer and Partner Relationships
• Confidence
• Cross Boundary Collaboration
• Drive for Results
• Impact and Influence
• Interpersonal Awareness
• Product and Technology Expertise
• Strategic Sales Planning
• Team Leadership
• Value Selling
People and Numbers
• People – the Art side
• Maximize relationships with enterprise accounts
• Partnering with a virtual team you’ll lead and orchestrate to
ensure a synergistic,
company-wide approach
• Have frequent contact with all levels of Microsoft and

customer managers and
employees
• Great customer service
• Gain new insights into large accounts in fascinating
industries.
• Numbers – the Science side
• Develop and execute plans that achieve revenue and strategic
objectives
• Identify and manage an opportunity pipeline
• Forecast accurately
• Use strong solution selling skills
What is selling?
Adding Value : Adapted from “Guerrilla Marketing Excellence”
by Jay C. Levinson
! Salespeople who are successful at creating value think in
terms of solving problems for
customers. These salespeople help customers view their

problems and opportunities in a new
light.
! To create and sell value salespeople must understand a
customer’s unique business needs,
beyond just a product or service.
! To add real value salespeople must become the greatest
informational resources customers
have. Salespeople should strive to provide insights on their
customers’ market and competition.
Educating customers builds loyalty that can’t be bought.
! Tell customers what your definition of value is. Some link
value to paying a low price. Others see
value as the benefits or features they receive from a product or
service that they can’t get
anywhere else. What is it that makes your product or service
valuable?

TIM-125/225
Management of Technology II:
Supply Chain Management
“Excel Tutorial”
Last modified:01/18/2012
written by:
R.Polany and S.Desa
UC Santa Cruz, Baskin School of Engineering
Table of Contents

Purpose
...............................................................................................
...................................... 1
Context
...............................................................................................
....................................... 1
Important Note for Mac users
...............................................................................................
...... 1
Tutorial platform
...............................................................................................
...................... 1
Solver Add-In
...............................................................................................
........................... 1
Problem Definition
...............................................................................................
....................... 2
Treatment

...............................................................................................
................................... 3
Execution: Pre-Processing (Setup)
............................................................................................ 4
Step 0:
...............................................................................................
..................................... 4
Execution: Processing
...............................................................................................
................. 5
Step 1: Build a ScenarioParameters worksheet
...................................................................... 5
Step 2: Build the BaseCase NPV analysis worksheet
............................................................. 6
Step 3: Create the +10% DevCost Worksheet
........................................................................ 8
Step 4: Create the -10% DevCost Workshet
..........................................................................10

Step 5: Create the +20% DevCost Workshet
.........................................................................11
Step 6: Create the -20% DevCost Worksheet
........................................................................12
.......................................................................13
........................................................................14
Step 9: Create the DevelopmentCost_Sensitivity summary
worksheet ..................................15
Step 10: Worksheet Tab Review
...........................................................................................16
Step 11: Graph the Change in NPV ($) vs. Change in DevCost
(%) ......................................17
Step 12: Create the +10% SalesVol
Worksheet.....................................................................21

Step 13: Create the -10% SalesVol Worksheet
.....................................................................23
Worksheet.....................................................................24
.....................................................................25
Worksheet.....................................................................26
.....................................................................27
Step 18: Create the SalesVolume_Sensitivity summary
worksheet .......................................28
Step 19: Graph the Change in NPV ($) vs. Change in Sales
Volume (%) ..............................29
Step 20: Using Solver to Determine Max Development Cost
.................................................30
Results: Post-Processing

...............................................................................................
...........36
Step 21: The Trade-off for Change in NPV ($) vs. Change in
DevCost (%) ...........................36
Step 22: The Trade-off for Change in NPV ($) vs. Change in
Sales Volumes (%) .................37
Step 23: Determine Maximum Development Cost with Solver
...............................................38
Step 24: Relationship of Development Cost to Sales Volume
................................................39
Conclusions
...............................................................................................
...............................40
Works Cited
...............................................................................................
...............................41

Purpose
In this tutorial, you will develop intermediate-level Excel skills,
as follows:
Pre-processing
1. Setting Up Excel Workbooks
a. Linking worksheets
b. Writing formulas
c. Formatting Spreadsheets
Software
Automation
Rapid
Problem

Solving
Processing
2. Exploring Scenarios
a. Entering parameters
b. Adjusting parameters
c. Performing sensitivity
analysis,
d. Optimization
e. Simulation
f. Summarizing results
Post-
Processing

3. Presenting Results
a. Graphing
b. Generating reports
c. Exporting content
d. Drawing conclusions
Figure 1: Structured Approach to Rapid Problem Solving with
Software Automation
This tutorial will walk you through the Pre-Processing,
Processing, and Post-Processing
approach to developing software automation utilizing Microsoft
Excel. The lessons you learn
will teach you how to solve new problems rapidly, and,
efficiently. You will then apply this new
knowledge to solving Supply Chain problems in the coursework
homework, exams, and project.

Important Note:
The skills identified above are essential for the subsequent work
you will be performing in the
TIM-125/225 coursework. We recommend you invest the time
now and develop your skills as
the coursework ramps up quickly. This tutorial can also help
you identify your strengths and
weaknesses using Excel, so that you can get the help you need
and stay current with the
coursework. You will be in very good shape for the course, once
you can 1) Duplicate the
results of this tutorial, 2) Achieve equal to or better quality and
3) Understand the process.
Page 1

Context
In TIM-105/205 (1), you were taught how to create and
implement a quantitative financial model
(i.e., NPV Analysis) for product development and
commercialization (2). We will use this
context1 to develop your Excel skills as listed above.
Important Note for Mac users
Tutorial platform
This tutorial is currently written for use on the Microsoft
Windows operating system, loaded with
Microsoft Excel 2010. So please beware: Some of the Graphic
User Interface features are
slightly different in a Mac environment.
Solver Add-In
As part of this tutorial, we walk you through how to use the

Solver Add-In to Excel and there are
issues with compatibility of this Add-In and the Mac version of
Excel.
Therefore, please first read “Getting Started with Excel” on the
TIM-125/225 course webpage
before working through this tutorial and specifically attempting
the portion with the Solver Add-
In. You will need to make sure that your version of the
Microsoft Excel is capable of performing
the prescribed computations in Excel, and can utilize the Solver
Add-in.
If you find that your version of Excel does not support the
Solver Add-In, two possible
resolutions are:
1) Work on a UCSC SOE Windows computer with Excel 2010,
with the Solver Add-In

enabled, in one of the labs.
2) Update to the Mac Excel 2011 with Service Pack 1 software:
a. Mac Excel 2011: Office for Mac 2011 Service Pack 1 (14.1.0)
needed.
Download Service Pack:
http://support.microsoft.com/kb/2525412
b. Mac Excel 2008:
http://www.solver.com/mac/dwnmacsolver.htm
1
The NPV Analysis is adopted from Ulrich, K. T., and Eppinger,
S.D., Product Design and Development, Fourth
Edition, McGraw-Hill, 2008. Chapter 15.

Problem Definition
Use the following Base Case scenario parameters:
(a) The total project length is four (4) years.
(b) The total Development Cost is $25,000,000.
(c) The average sales price (wholesale) is $2,500 per unit.
(d) The average production cost is $1,250 per unit.
(e) The total Ramp-up costs are estimated at $2,500,000.
(f) Ongoing market and support costs are $200,000 per month.
(g) Development time is 12 months.
(h) Production ramp-up time is 6 months.
(i) Ramp-up starts 9 months after the start of product

development and continues for 6
months.
(j) Ongoing “market and support" starts one quarter before
Production (of the product) and
selling (“sales” of the product ) start.
(k) Production (of the product) and selling (“sales” of the
product) occur immediately after
the end of the ramp-up period, and concludes at the end of year
4 (four).
(l) Assume that you could sell 35,000 units per year.
(m) The annual discount factor is 10% (i.e., 2.5% per quarter).
Answer the following questions:
(1) What is the NPV of the Base Case scenario?
(2) What is the maximum development cost beyond which the

development of the product cannot be
justified? (i.e., what is the development cost which makes
NPV=0). Use the Solver Add-In to
answer this question. Show your work.
(3) Explain the trade-off law for NPV versus development cost.
(4) Explain the trade-off law for NPV versus sales volume.
(5) Create a graph of the trade-off law relationship for the
(Change in NPV, $) (y-axis) versus
(Change in Development Cost, %) (x-axis). What is the equation
of the Regressed trendline?
Give the answer in the standard form for an equation of a line:
y=mx+b.
(6) Create a graph of the Trade-off law relationship for the to
the (Change in NPV, $) (y-axis) versus
(Change in Sales Volume, %) (x-axis). What is the equation of
the Regressed trendline?

Give the answer in the standard form for an equation of a line:
y=mx+b.
(7) If there is a 10% increase in development cost, by how much
does the sales volume need to
increase, to compensate for the drop in NPV?
Page 3
Treatment
1. Build a Base Case NPV Scenario
2. Use the Base Case to create: +/- 10%, +/- 20%, +/- 30%
Development Cost analysis
3. Use the Base Case to create: +/- 10%, +/- 20%, +/- 30% Sales
Volume analysis
4. Create a worksheet with summary tables

5. Graph the results to determine the slope of the line using
Regression Analysis trendline.
6. Use the Solver Add-In to automate the determination of the
Maximum development cost
for the project at which the project is no longer economically
practical (i.e., NPV=0).
7. Follow Ulrich’s (2) method (p.320) to determine the impact
of 10% increase in
development cost on NPV and the sales volume needed to
compensate for the drop.
8. Check the work.
9. Copy and Paste content into MS Word.
10. Label each Figure (i.e., Figure #: Title) and Table (i.e.,
Table #: Title).
11. Explain each Figure and Table.
12. Explain the Results.

13. Discuss the Conclusions.
Important Notes
As you work through this tutorial, it is essential that:
1) Worksheet tab names are formatted exactly as presented in
the tutorial, matching letter for
letter. This is important because we will be using linked
worksheets that will reference the
precise spelling of the tabs. A deviation from the exact spelling
will cause the worksheets
links to fail. Therefore, pay attention to UPPERCase and
lower_case, and spacing, as it
pertains to the formatting of the tab names. We used a
consistent nomenclature, therefore
you need to adhere to the format we used. You can change it
later (and improve it) once

you understand how it works; and
2) The numerical scenario data values and formulas must
entered in each corresponding cell
position, exactly as presented. If the tutorial defines to enter
something in a Cell B1 then
enter that specific information in Cell B1; otherwise the links
will fail, in relation to the rest of
this tutorial. We use the Fixed Cell References “$” and will
discuss this symbol latter; and
3) Save your work often. A simple approach is to email the file
to yourself so you have an
easily accessible copy in case your computer crashes, that you
can get from another
computer to continue working to meet deadlines.
Page 4

Execution: Pre-Processing (Setup)
Step 0:
Below is a checklist for you to make sure you have everything
you need before you get started:
1. Make sure that Microsoft Excel is loaded on your computer.
2. Enable the “Solver Add-In” with Excel
Windows OS instructions:
Useful video guide:
http://office.microsoft.com/en-us/excel-help/video-install-and-
activate-the-analysis-
toolpak-and-solver-VA101956375.aspx?CTT=1
/en-us/excel-
help/load-the-solver-add-in-HP010342660.aspx?CTT=1
-us/excel-

-us/excel-
Mac OS instructions:
needed.
Download Service Pack:
3. Enable the “Excel Analysis ToolPak” and “Analysis Toolpak
– VBA” within Excel.
Windows OS instructions:
-us/excel-
help/load-the-analysis-toolpak-HP010021569.aspx?CTT=3
-us/excel-

help/load-the-analysis-toolpak-HP010021569.aspx
-us/excel-
help/load-the-analysis-toolpak-HP001127724.aspx
Mac OS instructions:
http://www.microsoft.com/download/en/details.aspx?displaylan
g=en&id=17198
4. Recommend to print a hard-copy of this Tutorial (double-
sided).
5. Have a copy of your TIM-105/205 Lecture Notes on NPV
Analysis.
6. Have textbook: Ulrich, K. T., and Eppinger, S.D., Product
Design and Development, Fourth
Edition, McGraw-Hill, 2008, Chapter 15.

activate-the-analysis-toolpak-and-solver-
VA101956375.aspx?CTT=1
activate-the-analysis-toolpak-and-solver-
VA101956375.aspx?CTT=1
http://office.microsoft.com/en-us/excel-help/load-the-solver-
add-in-HP010342660.aspx?CTT=1
http://office.microsoft.com/en-us/excel-help/load-the-analysis-
toolpak-HP010021569.aspx?CTT=3
toolpak-HP010021569.aspx
toolpak-HP001127724.aspx
http://www.microsoft.com/download/en/details.aspx?displaylan
g=en&id=17198

Execution: Processing
Step 1: Build a ScenarioParameters worksheet
Create a worksheet and name the worksheet Tab:
ScenarioParameters
The worksheet is formatted as follows with the parameters:
Figure 1: ScenarioParameters worksheet format
Cell A1 and Cell B1 have been MERGED. Then the SCENARIO
INPUT PARAMETERS typed
inside this single merged cell.
The project schedule, from inception through end of the
production and selling will look like
Figure 2.

Figure 2: Complete Project Time Line from Inception to End
Observe how, that the production and selling concludes at the
“end of year four (4)”, as defined
in the problem statement. But, given the other events that occur
beforehand, the production and
selling does not start until Year 2-Q2.
Page 6
Step 2: Build the BaseCase NPV analysis worksheet
Now we show you how to build and setup the BaseCase scenario
to look as follows:
Figure 3: Base Case NPV Analysis
Note: The clean looking format for the number values is
utilizing a format configuration of:

NUMBER, Decimal Places=0 with 1000 Separator (,) and
format -1,234. You can achieve this
format by selecting all the cells. Then in the Number ribbon
(Figure 4), click the Show Number
tab icon, , and configure the number format (Figure 5). Rows 11
and Row 14 are configured
to Decimal places = 2.
Figure 4
Figure 5
Note: We use the symbol “$” on purpose and it is very
important. It is called a Fixed Cell Reference.
Putting the “$” sign before the column or row variable, causes
the link to remain fixed to that cell
reference. “One of the major ways to control a cell reference is

to set either the column or row reference
or both references. This is typically done by using a dollar sign
("$") before the column or row reference
(e.g., "$A4", "A$4", or "$A$4"). The dollar sign indicates that
the reference will not change, even if the
formula is copied and pasted.”
2
This is useful when you need to reference a specific input
parameter but
want to copy and paste formulae. Using the ("$") saves time in
programming the worksheets and ensures
accuracy.
2 http://www.sjsu.edu/depts/geography/resource/swdocs/xl-
guide/edit/celref.htm
Click here to show the
Format Cells:Number

options.
Page 7
The programming format to create the BaseCase worksheet is as
follows:
If you have programmed the BaseCase worksheet as defined
above, and made the correct
links to the ScenarioParameters worksheet, then the Project
NPV, $ will equal, precisely,
$62,166.18; rounded to 0 decimal places, it is $62,166. Recall
this value is in thousands.
Therefore, the conclusion is that the project has a high NPV
value of $62,166K and should be
pursued.

CELL CELL FORMULAE COPY TO
B6
=(-1)*ScenarioParameters!$B$3/4*(1/1000)
Note: Dividing by (1/1000) converts the dollar value from
Millions to Thousands. We do
this to simply the presentation of the spreadsheet.
C6:E6
E7 =(-1)*ScenarioParameters!$B$6/2*(1/1000) F7
F8 =(-1)*ScenarioParameters!$B$7/4*(1/1000) G8:Q8
G9 =(-
1)*(ScenarioParameters!$B$5)*(ScenarioParameters!$B$2/4)*(
1/1000) H9:Q9
G10 =ScenarioParameters!$B$2/4 H10:Q10

G11 =G9/G10 H11:Q11
G12
=(ScenarioParameters!$B$4*ScenarioParameters!$B$2/4)*(1/10
00) H12:Q12
G13
=ScenarioParameters!$B$2/4
Note: Dividing by 4 converts from Yearly to Quarterly
H13:Q13
G14 =G12/G13 H14:Q14
B16 =SUM(B6+B7+B8+B9+B12) C16:Q16
B17 =B16
C17
=C16/(1+(ScenarioParameters!$B$8/100)/4)^B3
Note: ScenarioParameters!$B$8/100 converts the parameter of
10 to 10%.

Then, division of by 4 converts from Yearly to Quarterly value
as needed.
Therefore, you get 1+(.025)=1.025 which is the needed value.
Lastly, the cell B3 is
shifted one to the left for the periods, so we start at one (1) for
the exponential factor.
This setup allows to quickly change the Discount Factor in the
ScenarioParameters,
worksheet to automatically update the entire workbook.
D17:Q17
B19 =SUM(B17:Q17)
Page 8

To quickly create a worksheet that is derived on the BaseCase
worksheet, we will use the
worksheet COPY feature of the BaseCase worksheet and then
make a few small changes.
To copy the worksheet, you will RIGHT-CLICK on the Tab of
worksheet BaseCase.
Then select “MOVE OR COPY…”
Figure 6: Right Click to Copy a Worksheet
Select the BaseCase worksheet, and Check the box to CREATE
A COPY.
Figure 7: Create a Worksheet Copy
Also, select MOVE TO END so the new worksheet will be
positioned at the end of the group of
worksheets. The Tan bame will be called BaseCase (2). So
rename the worksheet by double

clicking on the Tab, and typing a tab name of: +10% DevCost.
The name must be entered precisely to match this tutorial as we
will link to this Tab name later.
Then hit enter to save the Tab name. You can also right click on
the Tab and select a color to
help you identify the sheets. You can see that in we colored
ours a light blue,
Suggested Reference:
Watch a short and very useful video on YOUTUBE to show you
the process of how to:
Move or Copy a Worksheet (3)
http://www.youtube.com/watch?v=OucSxFiLyBc
http://www.youtube.com/watch?v=OucSxFiLyBc

Once you have the +10% DevCost worksheet created. It is quick
to edit the worksheet
parameters as follows:
The tab name to enter is: 10% DevCost
1. Cell A1, change to: Development Cost Analysis
2. Cell B1: change to: 10%
3. Cell B6: change to: =(-
1)*(ScenarioParameters!$B$3/4*(1/1000))*(1+$B$1)
a. Note: Multiplying by (-1) to create the negative effect of
cost.
b. Note: Dividing ScenarioParameters!$B$3 by 4 converts from
Yearly to Quarter.
c. Note: Multiplying ScenarioParameters!$B$3 by (1/1000)
converts from Millions to
Thousands.
d. Note: Multiplying by (1+$B$1), in which $B$1 is the 10% for
sensitivity value. Also, notice

the use of “$” before the Column ‘B’ and Row ‘1’. Putting the $
sign before the column
and row, causes the link to remain fixed to that cell reference. It
called Fixed Cell
References. “One of the major ways to control a cell reference
is to set either the column
or row reference or both references. This is typically done by
using a dollar sign ("$")
before the column or row reference (e.g., "$A4", "A$4", or
"$A$4"). The dollar sign
indicates that the reference will not change, even if the formula
is copied and pasted.” (4)
4. Copy B6 to C6:E6.
Figure 8: +10% DevCost Analysis
If you have followed this process correctly, then the result is a
Project NPV of $59,756K for the
10% DevCost worksheet, as shown in Figure 8.

Step 4: Create the -10% DevCost Workshet
Create a copy of the 10% DevCost worksheet.
The tab name to enter is: -10% DevCost
Once you have the -10% DevCost worksheet created, it is quick
to edit the Worksheet
1. Cell B1: Change to -10%
Figure 9: -10% DevCost NPV Analysis
-10% DevCost worksheet, as shown in Figure 9.

Step 5: Create the +20% DevCost Workshet
Create a copy of the -10% DevCost worksheet.
Once you have the 20% DevCost worksheet created, it is quick
to edit the Worksheet
1. Cell B1: Change to 20%
Figure 10: +20% DevCost NPV Analysis

Page 12
Repeat a copy of the 20% DevCost worksheet.

-20% DevCost worksheet, as shown in Figure 11.
Page 13
Create a copy of the -20% DevCost worksheet.
Once you have the 30% DevCost worksheet created, it is quick

Figure 12: 30% DevCost NPV Analysis
Page 14
Create a copy of the 30% DevCost worksheet.

-30% DevCost worksheet, as show in Figure 13.
Page 15
Step 9: Create the DevelopmentCost_Sensitivity summary
worksheet
Now we want to consolidate all the results into one worksheet,
to rapidly discern the results.
To do this, Insert a new, blank worksheet. This is done under
the HOME->INSERT menu
option.(or you use the Shift+F11 shortcut).

Figure 14: Insert Sheet (Shift+F11)
Name the Tab: DevelopmentCost_Sensitivity
Format and program the worksheet as follows:
Figure 15: Cell Programming for the
DevelopmentCost_Sensitivity worksheet
You will notice that the text in Cell A1 is formatted into in
three lines, within one Cell. This is
done using the ALT-ENTER command to create a Line Break,
within the Cell. Type “Change
In”, then press ALT-ENTER on the keyboard, type
“Development”, then press ALT-ENTER
again, type “Cost,%”, then press ENTER on the keyboard. This
process will create the three line
break, within one Cell. Then you can Center the text using the

built-in alignment tool .
Page 16
Figure 16: Format of the DevelopmentCost_Sensitivity
Worksheet
In Figure 16, is shown the final output format for the
DevelopmentCost_Sensitivity worksheet.
These results are now fully linked to all the worksheets, which
are connected to the
ScenarioParameters worksheet. Now, if you change one
parameter in the scenario, the
Sensitivity Analysis is instantly updated for you. You are now
capable of rapidly solving new
problems!
Step 10: Worksheet Tab Review

You can make sure your worksheet tab names look as follows.
You can drag and drop to move
them to different positions along the horizontal workbook axis.
Page 17
Step 11: Graph the Change in NPV ($) vs. Change in DevCost
(%)
Next, you want to graph the relationship between the (Chain in
NPV, $ Thousand)(y-axis) vs.
(Change in Development Cost, %)(x-axis).
To do this, you Insert a Chart. You can select the Scatter with

Smooth Lines and Markers.
Figure 17: Chart Format Option
Next, Select the Data.
Figure 18: Select the Data
Then ADD a data series:
Figure 19: Add a Data Series
Page 18
Configure the Series as follows, in which you type the text into
the white box. If you see “={1}” in
the Series Y values white space, delete it. Then enter the
information below

Figure 20: Edit Data Series X and Y axis
SERIES NAME: Change in NPV ($) vs Change in Dev Cost (%)
SERIES X VALUES:
=DevelopmentCost_Sensitivity!$B$2:$B$8
SERIES Y VALUES:
=DevelopmentCost_Sensitivity!$G$2:$G$8
Lastly, using the LAYOUT Ribbon, you will find all the options
to Label each axis and change
the units of the graph along with other visual tools
Figure 21: Layout Ribbon Tool to Label Charts
The end result, should look similar to the following chart in
Figure 22:
Figure 22: Change in NPV ($) vs. Change in DevCost (%)

One last useful technique is to determine the slope of the line.
There is a useful tool in Excel
called Trendline. You can search to learn more about Excel
Trendline.
Suggested Reference:
Watch a short and very useful video on YOUTUBE to show you
the process of how to:
Use Trendline and Regression Analysis (5):
http://www.youtube.com/watch?v=6rOlGbLeQxI
The shortcut approach is to right-click on the line, and selects
the ADD TRENDLINE.
Figure 23: Add Trendline Shortcut (right-click)

Then format the Trendline as follows:
Figure 24: Trendline Configuration
For this data series, we set the Regression
Line to Linear, because we are assuming
linearity in the data with the Base Case
crossing at x=0 and y=0, set Intercept to
equal 0. Restated, we are including the
BaseCase, which crosses both the X and Y
axis at exactly zero and therefore, zero will
be the Intercept of the equation.
Also, the important feature here is to check

the box to: Display Equation on Chart. This
will automate the regression analysis and put
the equation of the line on the chart.
http://www.youtube.com/watch?v=6rOlGbLeQxI
Page 20
The new Chart will look as show in Figure 25. Nnotice a thin
black line was created inside the
original line and the equation of the line is now visible:
Figure 25: Change in NPV ($) vs. Change in DevCost (%)
The equation in this example, in y=mx+b format, is . In
which m=-24100 and
b=0. That translates to a trade-off law: For each 10% increase

(x-axis value) in development
cost, there is a $2410 (in thousands) reduction in NPV.
To format the textbox containing the equation, like in Figure
25, click on the floating textbox that
contains the equation, and then change the Font Color and Font
Size and Fill the box with a
color, all to help it stand out. In this example, the font has been
increased to size 18, colored
Red, and filled with a White background to make it easier to
read against the grid lines. You can
also move the textbox and change its location, as necessary.
Figure 26: “Paste Special”
to Insert Graphics
You can copy the Chart in Excel, then open an MS Word
document and then can use the “Paste Special” option to insert

as a image (JPEG, BITMAP, or PNG) to ensure it is inserted
uniformly into the document. The format of BITMAP is the
least
compressed and therefore will increase the size of your
document the most. However, “what you see it what you get”,
so
is a safe option until you are comfortable adjusting the graphic
formats that minimize the file size and maximize readability.
When you paste images into MS Word, you can automate the
process of the sequential
numbering and labeling of the Figures/Table using Insert
Captions.
Useful Instructions Adding/Deleting Captions for Figures &
Tables:
http://office.microsoft.com/en-us/word-help/add-or-delete-
captions-HP001228982.aspx

Step 12: Create the +10% SalesVol Worksheet
Create a copy of the BaseCase worksheet.
The Tab name to enter is: 10% SalesVol
Once you have the 10% SalesVol worksheet created, it is quick
1. Cell A1, change to Sales Volume Analysis
2. Cell B1: change to 10%
3. Cell G9: change to:
=(-1)*(ScenarioParameters!$B$5)*(
(ScenarioParameters!$B$2/4) *(1+$B$1))*(1/1000)

a. Note: ScenarioParameters!$B$2 is the link to Sales &
Production Volume (units/year).
b. Note: ScenarioParameters!$B$5 is the link to the Unit
Productions Cost ($/unit).
c. Note: Dividing ScenarioParameters!$B$2 by 4, converts
Volume from Yearly to Quarterly
d. Note: Multiplying (ScenarioParameters!$B$2/4) by
(1+$B$1), in which $B$1 is the
sensitivity value, creates the change in measure for sensitivity.
e. Note: Multiplying (1/1000), converts from Millions $ to
Thousands $.
=(ScenarioParameters!$B$2/4)*(1+$B$1)
b. Note: Dividing ScenarioParameters!$B$2 by 4, converts
Volume from Yearly to

Quarterly.
c. Note: Multiplying (ScenarioParameters!$B$2/4) by (1+$B$1),
in which $B$1 is the
=(ScenarioParameters!$B$2)*((ScenarioParameters!$B$4/4)*(1
+$B$1))*(1/1000)
b. Note: ScenarioParameters!$B$4 is the link to Unit price
($/unit).
c. Note: Dividing ScenarioParameters!$B$4 by 4, converts
Volume from Yearly to Quarterly
d. Note: Multiplying (ScenarioParameters!$B$4/4) by
(1+$B$1), in which $B$1 is the
e. Note: Multiplying (1/1000), converts from Millions $ to
Thousands $.

=(ScenarioParameters!$B$2/4)*(1+$B$1)
b. Note: Dividing ScenarioParameters!$B$2 by 4, converts
Volume from Yearly to Quarterly.
c. Note: Multiplying (ScenarioParameters!$B$2/4) by (1+$B$1),
in which $B$1 is the
7. Copy G9 to H10:Q10.
8. Copy G10 to H10:Q10.
9. Copy G12 to H10:Q10.
10. Copy G13 to H10:Q10

Figure 27: 10% Sales Volume NPV Analysis
10% SalesVol worksheet, as show in Figure 27.
Page 23
Create a copy of the “10% SalesVol” worksheet.
The Tab name to enter is: -10% SalesVol
Once you have the -10% SalesVol worksheet created, it is quick

1. Cell B1: change to: -10%
Figure 28: -10% Sale Volume NPV Analysis
-10% SalesVol worksheet, as show in Figure 28.
Page 24
Create a copy of the “-10% SalesVol” worksheet.
1. Cell B1: change to 20%

20% SalesVol worksheet, as shown in Figure 29.
Page 25
1. Cell B1: change to -20%
Figure 30: -20% SalesVol NPV Analysis
Project NPV of $43,311 for the

Create a copy of the “-20% SalesVol” worksheet.
30% SalesVol worksheet, as show in Figure 31.

Figure 32: -30% Sales Volume NPV Analysis
Project NPV of $33,884 for the
Page 28
Step 18: Create the SalesVolume_Sensitivity summary
worksheet

Create a new worksheet and name the worksheet Tab:
SalesVolume_Sensitivity
Format and program the worksheet as follows:
Figure 33: Programming format for SalesVolume_Sensitivity
Summary Table
Figure 34: SalesVolume_Sensitivity Summary Table Results
As shown in Figure 34, the table is linked to all the Sales
Volume worksheets and provides a
clearly organized summary of the SalesVolume_Sensitivity.
Page 29
Step 19: Graph the Change in NPV ($) vs. Change in Sales
Volume (%)

Lastly, graph the relationship between the (Change in NPV, $
Thousands) vs. (Change in
Sales Volume, %) as shown in Figure 35.
Figure 35: Change in NPV ($) vs. Change in Sales Volume (%)
The equation in this example, in y=mx+b format, is .
That translates to a trade-off law: For each 10% (x-axis value)
increase in Sales Volumes, there
is $9,427.50K increase in NPV.
Page 30
Step 20: Using Solver to Determine Max Development Cost
Note: Recall that in TIM-105 (1), you were given a problem on

the Final Exam to determine the
maximum development cost, for which a project would no
longer be feasible. Note, that on the
Final Exam, we also gave you (via email), a process for solving
the problem.
Now, we will walk you through an alternative method for
solving this problem using an Add-In
tool in Excel called SOLVER. This tool will be extremely
helpful later in this course (TIM-
125/225) and in your project. You can reference the “Getting
Started in Visual Basic” on the
TIM-125/225 course website to learn more.
A fast approach (i.e., takes under 1 minute for the author to do)
to solving the maximum
development cost problem is using the Solver Excel Add-in, to
quickly determine what is the

maximum development cost is the as follows:
On the ScenarioParameters worksheet, create a Cell Reference
link to the NPV value in the
BaseCase worksheet.
As shown in Figure 36, on ScenarioParameters Cell B1 enter:
=BaseCase!B19. This will make
a cell reference to the cell B19 of the BaseCase, which contains
the NPV we want the Solver
Add-In to optimize.
Figure 36: Programming of the ScenarioParemeters link to the
BaseCase NPV
Page 31
Next, Open the Solver in the DATA: Analysis Ribbon:

Figure 37
Figure 38: Solver Configuration
To configure Solver to perform a simple optimization, to
determine the optimal values in Cell
$B$3, that makes Cell $B$11 equal to Value of 0 (zero), Solver
will automatically make many
Page 32
rapid changes in Cell $B$3 until Cell $B$11 reaches zero (0).
Then it will stop and insert the
solution in cell $B$3. This process will be almost instantaneous.
Select the GRG Nonlinear
Solving Method.
You need to also adjust a few of the OPTIONS to adjust for the

accuracy of the optimizations.
You can find the Options next the Solving Method (see Figure
38).
Figure 39: Adjustment of Options for Constraint Precision
Set the OPTIONS: ALL METHODS: CONSTRAINT
PRECISION to: 0.00001
Do not check any of the boxes.
Page 33
Figure 40
Set the Convergence for the GRG NonLinear Engine to:
0.000001
Leave the Derivate as Forward, and leave the Multi-start and

Required Bonds unchecked.
Now click the Solve button to run the optimization.
If you did it correctly, then the result will be a maximum
development cost = $89,487,343.115
In the next windows that popups up, you will have the option to
KEEP or RESTORE the results.
And, o have Reports generated for your work. These reports are
good to include with your work
and results.
Page 34
Figure 41: Solver Results
If you agree with the on-screen result, then select the Keep
Solver

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